3 hot UK growth shares I’d buy for 2022

Our writer picks out three UK growth shares he would consider buying for his portfolio now hoping for continued success in 2022.

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It’s been a good year so far for many UK shares. But that doesn’t mean 2022 will be the same. That is why I have been looking for UK growth shares that have gone up in 2021 but still have potential to go higher.

Here are three I would consider buying for my portfolio today.

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Retailing star: B&M

The bargain retailer B&M European Value (LSE: BME) turned out to be a bit of bargain itself this year. Over the past 12 months, the B&M share price has risen by 21%, at the time of writing this article yesterday.

But I reckon there could be more growth to come at the chain in 2022. Its formula of low prices, well-known brands, and conveniently located stores could see it continuing to improve its performance. In its interim results last month, B&M revealed that revenue grew slightly last year even on top of a stellar performance the prior year. Over two years, revenues are up 26.8%. Diluted earnings per share also grew modestly, edging up 1.7%.

Last year’s dividends totalled 62.3p. That seemed exceptional, but the company has already declared 30p per share of dividends for the current year — and there may be more to come. Risks with B&M include a shift to online retailing in the UK, which could lead to lower sales in future for the group, given its focus on physical shops. Despite that, I would happily buy B&M for my portfolio today.

Digital ad group: S4 Capital

Lately there’s been a big drop in the S4 Capital share price. I think that reflects valuation concerns after the shares ran up sharply this year. Even after the fall, S4 is 11% higher than it was a year ago.

I think the recent fall is a buying opportunity for my portfolio and may add to my existing S4 position soon. The company has grown massively in 2021. It is on track to double revenues and profits in three years.

The company is building a digital ad network able to attract some of the ad world’s largest clients. That could be a source of long-term competitive advantage. But it also costs money. There is a risk that rising staff costs will increase the company’s losses in the next several years.

Storage operator: Safestore

Among UK growth shares I have bought for my portfolio this year, Safestore (LSE: SAFE) is one I would happily keep buying as we head towards 2022.

The shares are up 87% over the past year. But I see continued growth prospects for the business, which could help propel the Safestore share price higher in coming years. It is a market leader in self-storage. Demand for such storage is likely to keep growing in the UK, where it is a newer industry than in the US. Tenants often rent units for years, meaning that profit margins can be strong and revenues fairly resilient. Safestore has established a well-known brand which should help it attract and retain customers. Its business strategy is working well, with post-tax profits of £178m last year. If it keeps doing what it is doing, I think it can benefit from rising demand in the self-storage market.

One risk is low barriers to entry in the industry. If an upstart competitor offers cheap prices, that could hurt profit margins for existing players like Safestore.

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Christopher Ruane shares in Safestore and S4 Capital. The Motley Fool UK has recommended B&M European Value. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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